Ghana Economy

Ghana Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax System

Basic data

Ghana is one of the fastest growing economies in Africa. Despite a significant downturn in the economy in 2020 due to pandemic measures, the economy returned to 5% GDP growth in 2021. The Ghanaian economy is heavily dependent on the production and export of hydrocarbons, gold and cocoa, the economy is also supported by agriculture and services. In addition to continuing attempts to mitigate the impact of the pandemic, the government will prioritize strengthening agro-processing and food security (through import support) and promoting diversified growth in exports and foreign direct investment, in line with its long-term Ghana Beyond Aid development strategy. Supply-side pressures – including high energy and food prices, new taxes, rising global commodity prices and increased freight charges, coupled with supply chain disruptions from the Ukraine conflict are likely to keep inflation (particularly fuel costs) elevated into 2022. This will reflect tightening monetary policy and weakening supply-side price pressures, partially offset by the ongoing depreciation of the local currency. The current account has been in deficit for a long time. According to estimates, 32 million people live in the country, with a GDP per capita of approximately thousand. USD. There is relatively high unemployment in the country, especially among young people, which may be one of the factors that could cause political instability in the future. Check ebizdir for economical facts of Ghana.

The main economic sector is services (contributing approximately 47.2% to GDP in 2021), followed by industry (34.5% of GDP) and agriculture (18.50% of GDP). Ghana’s economy depends on oil and gas, agriculture, services and the mining of gold and other minerals. Ghana mainly exports cocoa, petroleum, gold, diamonds, bauxite, manganese and tropical timber, while importing rice, poultry, automobiles, engineering products, consumer goods of all kinds, chemicals, electronics, refined petroleum and petroleum products, textiles, pharmaceuticals.

Table from MOP + additionally balance of payments, indebtedness/GDP.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) 6.5 -0.2 5 5.2 4.7
GDP/population (USD/PPP) 5,651.90 5,742.90 6,090.00 6,540.00 6,870.0
Inflation (%) 8.5 9.9 10 11.1 9.3
Unemployment (%) 4.3 4.7 ON ON ON
Export of goods (billion USD) 15.7 14.5 14.7 15.1 14.6
Import of goods (billion USD) 13.4 12.4 13.3 13.7 14
Trade Balance (Billion USD) 2.3 2 1.1 1.4 0.6
Industrial production (% change) ON ON ON ON ON
Population (millions) 30.4 31.1 31.7 32.4 33.1
Competitiveness ON ON ON ON ON
OECD export risk 06.VII 06.VII 06.VII ON ON

Source: EIU, OECD, IMD

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) -9.2
Public debt (% of GDP) 81
Current account balance (billion USD) -2.5
Taxes 2022

In December 2021, the parliament approved the budget (without controversial e-levies) for 2022, which envisages a 44% increase in domestic revenues compared to the 2021 budget, to 100.5 billion. The budget continues to prioritize strengthening economic diversification, infrastructure development, fiscal management and public health. Rising global oil and gold prices (a major export), exacerbated by disruptions related to the war between Russia and Ukraine, will support earnings this year. Non-oil revenues, including direct taxes, will remain strong in 2022-26. Expenditure as a share of GDP is likely to decline in 2022-23, but is likely to rise again in 2024 due to election-related spending.

The Bank of Ghana (BoG central bank) raised the interest rate by 100 basis points to 14.5% at its November 2021 Monetary Policy Committee meeting to curb rising inflationary pressures. Supply-side pressures – including high energy and food prices, new taxes, rising global commodity prices and increased freight charges, along with supply chain disruptions from the Ukraine conflict – are likely to keep inflation (particularly fuel costs) elevated in 2022.

One of the most pressing problems is the national debt, which already reaches 82% of GDP. The government has signaled debt consolidation and spending cuts of 20%. Gross international reserves stood at $10,69 million at the end of September 2021, equivalent to months of import coverage, while at the end of December 2020, 4.0 months of import coverage were recorded. The fiscal deficit is expected to narrow to 6.9% of GDP in 2022, from an estimated 9% of GDP in 2021. The government will continue to rely heavily on domestic borrowing, reflecting the tightening of external financing conditions.

Banking system

The Central Bank of Ghana is responsible for the supervision and regulation of all banks in the country. Since 2017, the Central Bank of Ghana has initiated reforms in the banking sector. The reforms led to an increase in the minimum capital requirement of commercial banks to 400 million GHS. This process led to the cancellation of the licenses of some banks and the merger of smaller banks. The country’s banking sector reform for 2020 cost GHS 1billion, representing 5% of GDP. There are currently 25 licensed banks. Ghana’s financial services sector is divided into 3 main categories – banking, non-banking and microfinance institutions. Savings and loan companies fall under the category of non-banking financial institutions, while microfinance companies fall under the category of microfinance. Savings and credit companies should have an initial capital of GHS 15 million, microfinance companies GHS 2 million.

5 largest banks: Societe Generale (Ghana) Limited,Zenith Bank (Ghana) Limited,Barclays Bank of Ghana Limited,First National Bank (Ghana) Limited,First Atlantic Bank Limited

5 largest insurance companies: Allianz Insurance Company Gh. Ltd, Enterprise Life Assurance Company,Prudential Life Insurance Ghana,Star Assurance Company Limited,Hollard Life Assurance Company Limited

Tax system

The Ghana Revenue Authority (GRA) is the institution responsible for the collection, assessment and accounting of income tax in Ghana. Value Added Tax is administered by the Domestic Tax Revenue Division (DTRD), which falls under the GRA; customs and indirect taxes are administered by the Customs Division (CD), also operating under the GRA.

In addition to exempt goods and services, Value Added Tax (National Health Insurance Levy) and Health Insurance Levy are charged on all supplies of goods and services within Ghana and on imported goods and services. Ghana has decoupled the 2.5% National Health Insurance levy from the VAT rate. This means that the new VAT rate is 12.5% ​​instead of the previous consolidated 15%. VAT is charged for all taxable suppliers, as well as for imports. The 2.5% National Health Insurance Levy is now combined with the 2.5% Education Trust Levy. This results in a combined levy of 5%. This new levy is now called the “Health and Education Levy”.

The government introduced six new taxes in 2021 • Tax on betting/gambling. • Covid-19 Health Insurance Tax of 1% of VAT, flat rate regime (VFRS) and 1% of National Health Insurance Levy (NHIL) as part of measures to support economic recovery. • Recovery allowance for the energy sector of 20 pesewas per liter of fuel. • Road tolls • Sanitation and pollution levy • Financial sector clean-up levy

Tax system in 2021: • Individuals and legal entities are required to pay income tax (5-25%) • corporate income tax is generally 25% • companies operating in the mining industry and the so-called “upstream” petrochemical industry (survey and mining) pays 35% • preferential rates are e.g. hotels 22% • companies in free zones pay 15% after tax holidays • only 8% of non-traditional production is exported • capital income tax (10-15%) • gift tax ( 5%) • property tax, rental tax (8%) • farm loans and leasing companies pay only 20% • stock exchange companies (Ghana Stock Exchange) only have 22% from 1/1/2004 value added tax and social and national levy health insurance (NHIL)

Ghana Economy